U.S. job market goes from strength to strength as global stock markets tremble

The latest BLS employment report showed remarkable strength in the U.S. job market even as global financial markets were trembling. Employers added 292,000 to their payrolls in December. Upward revisions in previous BLS estimates also boosted gains in October and November. In the last quarter of 2015, payrolls increased at a rate of 284,000 per month, a remarkable performance in the face of rising uncertainty about prospects for the world economy. U.S. employers added a total of 2.65 million jobs in 2015, the second best calendar-year gain of the current recovery. (Gains were stronger in 2014 but smaller in earlier years of the recovery.)

As usual, private employers accounted for an overwhelming share of the job gains. Ninety-seven percent of the gains in the fourth quarter and 96 percent of the gains last year occurred as a result of employment gains in the private sector. Whatever the uncertainty of the world economic outlook, U.S. employers have enough confidence in their own prospects to keep adding to their payrolls at a healthy clip. Public employment remains about 375,000 (1.7 percent) lower than it was at the onset of the Great Depression. Though government payrolls are now growing, in percentage terms they have been rising much more slowly that private payrolls.

Sizeable job gains were recorded in construction, transportation, motion pictures, professional and business services, leisure and hospitality industries, and health care. Gains were modest or negligible in manufacturing and retail trade. Payrolls fell for the twelfth consecutive month in mining, primarily as a result of continued weakness in world energy prices.   

Average hourly pay in private firms edged down 1 cent in December, but the nominal wage was 2.5 percent higher than its level 12 months earlier. This is a somewhat faster rate of improvement compared with the gains workers saw between 2010 and 2014. In terms of purchasing power, U.S. workers are clearly enjoying faster pay gains as a result of lower inflation. The 12-month change in real hourly earnings through November was 1.8 percent, the fastest rate of improvement in the current recovery. 

The BLS household survey also contained a big helping of good news. The unemployment rate remained unchanged, at 5.0 percent, but that was the result of sizeable employment gains combined with a notable influx into the active labor force. The number of survey respondents who said they were employed jumped 485,000, and the number saying they held a job or were actively looking rose 466,000. Over the past 12 months the labor force has increased only 1.69 million, but the number of household survey respondents who say they hold a job has increased 2.49 million.  Contrary to predictions that the implementation of the Affordable Care Act would push employers to put workers on part-time schedules, an overwhelming share of job growth has been in full-time positions. The number of survey respondents who said they held full-time jobs increased 504,000 in December. It has increased 2.6 million over the past year.

The gray cloud in the latest jobs report is the continued weakness in the prime-age labor force participation rate. The participation rate of men and women between 25 and 54 years old is now 80.9 percent, exactly the same as its level a year ago but more than 2 percentage points below its level before the Great Recession. Most labor economists anticipate that easier job finding and rising real hourly pay will bring more potential workers back into the workforce. Among Americans in their prime working years, however, that resurgence in participation is hard to see.